Governance Forum: "Government's MSCI Inclusion Roadmap Is A+... Further Perception Improvement Needed"

The Korea Corporate Governance Forum praised the government's roadmap for inclusion in the Morgan Stanley Capital International (MSCI) Developed Market Index, but also argued that additional efforts are needed to improve international investors' perceptions of the Korean capital market.

On January 12, the Governance Forum stated in a commentary, "The government's announced MSCI inclusion roadmap is comprehensive and presents very detailed action items for eight areas of improvement, which is impressive," adding, "If we were to grade it, it would be a near-perfect plan, close to an A+." Previously, the Ministry of Economy and Finance unveiled the "Comprehensive Roadmap for Foreign Exchange and Capital Markets for MSCI Developed Market Index Inclusion" as part of the "2026 Economic Growth Strategy" on January 9.

The Governance Forum noted that the government had taken a direct approach to addressing issues of market accessibility that had been pointed out overseas, such as "opening the domestic foreign exchange market 24 hours" and "improving convenience for investor registration and account opening." The Forum stated, "Unlike emerging market funds, developed market funds have less capital inflow and outflow, allowing for long-term investment," and added, "If Korea is included in the MSCI Developed Market Index, not only will domestic stock prices benefit, but the phenomenon of exchange rates being dictated by net foreign purchases or sales of domestic stocks will also diminish, leading to greater exchange rate stability as a secondary effect."

However, the "wall of distrust" prevalent among international investors remains a challenge to be addressed. The Governance Forum stressed, "In addition to the improvements in foreign exchange transactions and securities investment systems listed in the roadmap, building trust in our government is extremely important," and advised, "We must not loosen our grip on governance improvements, such as the repeatedly delayed third revision of the Commercial Act and the Capital Markets Act revision scheduled for this year."

The Forum also called for improvements in English-language information. It noted, "Although English-language materials from key ministries and agencies handling major policies and legislation-such as the stock exchange, the Financial Services Commission, the Financial Supervisory Service, and the Ministry of Justice-have improved, they remain insufficient," emphasizing, "From the perspective of international investors, a breakthrough improvement is needed." Specifically, the Forum proposed making English disclosures mandatory and revising the criteria for large-cap KOSDAQ companies in the three-stage disclosure system from asset-based to market capitalization-based. It also suggested that performance indicators such as business group rankings be based on market capitalization rather than asset size. However, it cautioned that the group-level market capitalization aggregation method commonly used by media outlets could encourage duplicate listings, and thus a reasonable alternative is needed.

The Governance Forum also addressed the protection of voting rights for foreign investors. It pointed out, "In the past, there have been cases where foreign votes were lost during domestic shareholders' meetings," and suggested, "System improvements such as alternative settlement are necessary. In particular, system upgrades are needed when implementing cumulative voting." The Forum diagnosed that the 14-day notice period for convening shareholders' meetings is excessively short, and that requiring the Korea Securities Depository to have foreign investors exercise their voting rights at least five business days in advance restricts in-depth review of agenda items.

The Governance Forum emphasized, "It is important to remember that the decision on MSCI Developed Market Index inclusion is not made by MSCI alone, but hinges on changing perceptions of Korea among key stakeholders in the international financial market." It added, "It is crucial for senior officials at the Financial Services Commission, the Financial Supervisory Service, the stock exchange, and the Ministry of Justice to maintain an open attitude, meet with international investors, and establish mechanisms for consistently listening to their feedback."